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Regional development under socialism: evidence from Yugoslavia

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  • Kukić, Leonard

Abstract

This paper analyses the patterns of regional growth and development in Yugoslavia, under the most decentralised socialist system that ever existed. My analysis reveals that despite government efforts to the contrary, socialist economic development in Yugoslavia resulted in divergence rather than in convergence between the constituent regions. I find that regional income divergence was caused by the failure of the less developed regions to converge towards the employment rates and total factor productivities of the more developed regions. I interpret these failures as symptoms of a single underlying problem: a capital intensity bias inherent to the governing objective of labour-managed firms. Socialist Yugoslavia moved from having one central plan, to having many mutually competitive plans. While on aggregate this may have created a net positive productivity outcome compared to other socialist economies, it created unique distortions. The decentralisation policies were implemented with the aim of enhancing regional cohesion and social stability. They led, however, to exactly opposite outcomes

Suggested Citation

  • Kukić, Leonard, 2017. "Regional development under socialism: evidence from Yugoslavia," LSE Research Online Documents on Economics 85078, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:85078
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    File URL: http://eprints.lse.ac.uk/85078/
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    References listed on IDEAS

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    1. Boyd, Michael L, 1987. "The Performance of Private and Cooperative Socialist Organization: Postwar Yugoslav Agriculture," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 205-214, May.
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    3. Bevc, Milena, 1993. "Rates of return to investment in education in former Yugoslavia in the 1970s and 1980s by region," Economics of Education Review, Elsevier, vol. 12(4), pages 325-343, December.
    4. Desai, Padma, 1976. "The Production Function and Technical Change in Postwar Soviet Industry: A Reexamination," American Economic Review, American Economic Association, vol. 66(3), pages 372-381, June.
    5. Hayami, Yujiro & Ruttan, Vernon W, 1970. "Agricultural Productivity Differences Among Countries," American Economic Review, American Economic Association, vol. 60(5), pages 895-911, December.
    6. Vollrath, Dietrich, 2009. "How important are dual economy effects for aggregate productivity?," Journal of Development Economics, Elsevier, vol. 88(2), pages 325-334, March.
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    Cited by:

    1. Kukić, Leonard, 2017. "Socialist growth revisited: insights from Yugoslavia," LSE Research Online Documents on Economics 85079, London School of Economics and Political Science, LSE Library.
    2. Luka Miladinović, 2025. "Brotherhood and unity: ethnic diversity and economic performance in socialist Yugoslavia," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 19(2), pages 445-485, May.

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    Keywords

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    JEL classification:

    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects

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